Search for question

that each firm can supply are[0,65]. As a result, each firm's utility function is given by:= 130-2(q1+q2). Suppose that firms 1 and 2 simultaneously u 1(q 1, q 2)=(130-2(q 1+q 2)) q 1-10 q 1 u 2(q 1, q 2)=(130-2(q 1+q 2)) q 2-10 q 2 Part a: If firm 2 produces quantityq2, what is the best response for firm 1? Use this to solve for the best response function for firm 1,BR1 (q2). Similarly solve for the best response function for firm 2,BR2(q2). Part b: What are the strictly dominated strategies of each firm in this game? Justify why each of these strategies is strictly dominated. Justify why all other strategies are not strictly dominated. Part c: After having eliminated the strictly dominated strategies found in part a, what are the strictly dominated strategies in the reduced game? Provide justification again. Part d: What are the rationalizable strategies for each player? What are the rationalizable strategy profiles?

Fig: 1

Fig: 2

Fig: 3

Fig: 4

Fig: 5

Fig: 6

Fig: 7